Young Americans are getting hit hard by the interest rate tightening cycle. Coupled with the impending implosion of Social Security and the $33 trillion in debt their parents and grandparents racked up, the future looks hard for Millennials and Gen-Zers. In The Robin Report, Warren Shoulberg explains that despite the troubles faced by younger generations, Baby Boomers are still consuming. He writes:
The boomers, we all know, generally never met something they didn’t think they needed to buy. All those idealistic values that guided them earlier in their lives — the creation of Earth Day, anti-war protests, rants against corporate America ethics, and general rages against the machine fell by the wayside over the years as the credit card debt, home equity loans and paycheck-to-paycheck existences became more commonplace.
Through it all the value of their homes continued to increase – even after the 2009 housing crash – and the rich pensions that are now a thing of the past made them the last generation to have this guaranteed, built-in nest egg to tap. In fact, when you factor in $72 trillion going directly to boomer heirs, they are sitting on real money.
So, a new recommendation from Bank of America says businesses need to follow the Willie Sutton theory of wealth accumulation. Asked why he robbed banks, the legend says he responded, “That’s where the money is.” BofA is now saying the same thing.
Bloomberg put it best: “Go long on old people stocks” and by association on those businesses that cater to them. “Millennials are really feeling the impact of the hiking(rates) cycle,” said the bank’s quantitative strategist Ohsung Kwon. “Boomers not so much. We’re starting to see a big division between the two.” BofA data, according to the Bloomberg report, shows that boomers and those right before them (the greatest silent generation or whatever you want to call them) “are accounting for the lion’s share of US consumption today. Younger generations are cutting back their spending while their credit card delinquencies go up.
“Pre-pandemic, the empirical evidence was there supporting that boomers are doing better than millennials in regards to investments, retirement accounts and home ownership,” Bloomberg quotes Blanke Schein Wealth Management chief investment officer Robert Schein. “And post-pandemic, that divide, because of higher inflation and elevated interest rates, has gotten dramatically worse. The divide is just gigantic.”
Of course, one needs to drill down a bit to get a more accurate picture. While many boomers are living comfortably on savings, retirement funds and the values of their homes, there are large numbers who are not, subsisting on Social Security and meager pensions. These people are not going on cruises, redoing their kitchens, and traveling to Europe. Boomers, like every generation before and after, have many layers to peel back to get the true story.
Read more here.